Matt's Thoughts In Between - Issue #10

Entrepreneurs and "illicit" behaviour

This week I came across a great study by Ross Levine and Yona Rubinstein on entrepreneurs and "illicit behaviour". They report some fascinating findings.

First, they show that a result often reported by academics, that entrepreneurs earn less money than employees, is distorted by an overly broad definition of entrepreneurship. In fact, if you disaggregate the data by something as simple as whether someone incorporates a company, you find that incorporated entrepreneurs earn significantly (about a third) more than salaried workers of the same cognitive ability.

Most interestingly, though, they find that a major predictor of becoming an (incorporated) entrepreneur is "illicit behaviour" as a teenager - which they define by a measure that includes "skipping school, use of alcohol and marijuana, vandalism, shoplifting, drug dealing, robbery[!], assault[!!] and gambling". Moreover, people with high cognitive ability and high illicit behaviour scores earn more as entrepreneurs than individuals without those traits.

I'd add an important caveat though. The empirical literature thus far shows what happens in the absence of other intervention, not iron laws of nature. I don't think that venture capitalists should chase juvenile miscreants (nor, based on last week's article, that they should obsess over founders with less impressive credentials). Rather, I think the big opportunity is to ask why these patterns are currently found in the data and what infrastructure we'd have to build to make startups more mainstream and more accessible for talented and ambitious individuals... I hope EF is part of the answer.

Facebook as a national security asset

The big tech set piece of the week was Mark Zuckerberg's testimony before the US Congress. It was by turns depressing and bizarre, but Ben Thompson (of the excellent Stratechery) identified the most interesting nugget (summarised here): Zuckerberg's implication that Facebook shouldn't be overly regulated, as it represents a US national security asset versus China. Perhaps that sounds a stretch (and self-serving) today, but I think we'll be hearing this sort of argument more and more, particularly as China makes increasingly nationalistic moves towards its tech industry.

It's striking to me how much this line of thought - which seemed quite fringe just a year ago - is now mainstream. This Techcrunch post from yesterday is a good summary of the standard arguments for the US adopting an "arms race" mindset towards its tech giants and their relative success. I think it's far too soon to say how this plays out, but it certainly makes me skeptical that we're about to see a privacy renaissance. History suggests that privacy rarely triumphs over national security concerns, however tenuous (except maybe in Europe? Great thread on this).

The golden age of... orcs?

Several readers tweeted about the artificial intelligence/Dungeons and Dragons article from last week's Quick Links. I then ran into this fascinating piece on the ideological foundations of D&D (which I confess I've never played). The basic argument is that D&D is a libertarian heaven; I enjoyed this line: "D&D is a deeply libertarian game—not in a crude political sense or because its currency system is based on precious metals, but in its expansive and generous belief in its players' creative potential." It's a particularly interesting read in the context of the discussion from a few weeks ago on games and utopias.

Almost immediately afterwards I saw this article about Amazon's $1bn investment in a new Lord of the Rings-themed TV series - and then this announcement that a "new" Tolkien book will be published this year. It's most likely purely a reflection of my filter bubble, but part of me wonders whether extraordinary political strife in the news prompts greater demand for escapist experiences. There's an investment thesis for a niche vertical VC...

Quick links

If books could talk...: Fun Google demo that allows you to "ask" questions of their entire corpus of books
Algorithmic creativity: What happens when algorithms don't behave as you expect?
Choose Your Own Adventure, 2018 edition: I haven't tried it yet, but "Can you Brexit?" an interactive book/game that asks you to navigate leaving the EU in Choose Your Own Adventure style sounds amazing (Bonus: what do we actually know about the Brexit vote?)
Optimistic thought of the day: Might Syria start WW3? Oh and how does European youth unemployment look?
Rule one, don't have your lawyer raided: What do Trump's lawyer's woes mean for him? Nothing good.

Your feedback

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Until next week,

Matt